Mutual Fund News

A whole new frontier in emerging markets

We looked at the 15 top performing emerging-markets equity funds for the year ended Jan. 31. U.S. dollar, segregated and duplicate versions were excluded.

What did we find?

A frontier emerging markets fund outpacing its peers by a wide margin.

Templeton Frontier Markets, which is managed by globetrotting manager Mark Mobius of Franklin Templeton Investments, has gained nearly 22 per cent. Interestingly, its return also trounced his other funds (not shown) such as Templeton Emerging Markets, up 4.7 per cent, and Templeton BRIC, off 0.2 per cent.

Frontier markets refers to countries with smaller economies that are in their early stages of development. They have stock markets that are investable, but don't have the market capitalization or liquidity of more mature emerging markets.

"We want to leverage the high growth [particularly] in African countries," Mr. Mobius said in an e-mail. "Many of the companies were undiscovered when we invested in them. As we invested, they were more widely recognized by the market, and therefore experienced price appreciation."

The biggest country weightings in the fund recently were Nigeria, Qatar and Kazakhstan. At least 80 per cent of its assets are invested in the frontier markets. He also runs more than $2.5-billion (U.S.) in assets invested in other frontier emerging market funds that are sold in the United States and overseas.

The top10 holdings in the Canadian version include names such as OMV Petrom, a Romania-based oil and gas company; Industries Qatar, a holding company with petrochemical, fertilizer and steel manufacturing subsidiaries; and FBN Holdings, owner of First Bank of Nigeria PLC.

In a recent blog on the U.S. Franklin Templeton website, Mr. Mobius said that the growth rates in many frontier markets sharply exceeded those of developed markets in 2012. "I believe that trend is likely to continue," he wrote. "Many frontier market countries have continued to be positively impacted by the substantial investments made by large emerging markets countries such as China, India, Russia and Brazil."

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LEADERS AMONG EMERGING MARKETS EQUITY FUNDS FOR THE YEAR ENDED JAN. 31

Fund

Ticker

1-year % retrn (Jan. 31)

3-year % retrn (Jan. 31)

5-year % retrn (Jan. 31)

2012 % return

2011 % return

2010 % return

2009 % return

2008 % return

MER

Assets ($-mil)

Templeton Frontier Markets-Class A

21.9%

-

-

18.8%

-

-

-

-

3.20

5.0

Mackenzie Cundill Emrg Mkts Value Cl-A

12.5%

3.6%

-7.6%

12.3%

-29.7%

39.2%

48.5%

-64.8%

2.88

193.7

Desjardins Emerging Markets-A

12.3%

10.6%

7.6%

20.6%

-10.5%

18.7%

48.6%

-30.2%

2.84

62.3

RBC Emerging Markets Equity-A

10.9%

-

-

17.7%

-15.7%

-

-

-

2.40

1,508.1

Signature Emerging Markets

10.8%

4.6%

0.0%

14.3%

-16.9%

11.5%

51.3%

-45.6%

2.72

146.6

BMO Emerging Markets *

9.5%

5.7%

-0.1%

20.2%

-20.2%

17.8%

46.8%

-47.1%

2.60

114.9

TD Emerging Markets

9.5%

3.9%

-2.1%

15.6%

-17.4%

10.8%

41.2%

-47.2%

2.88

177.4

Redwood Emerging Markets Dividend

8.0%

-

-

13.3%

-9.0%

-

-

-

4.25

4.0

Excel BRIC

7.5%

-1.7%

-

12.9%

-27.2%

6.3%

-

-

3.33

11.8

Dynamic Emerging Markets Class-A

7.4%

-

-

12.8%

-27.0%

-

-

-

2.89

27.3

Brandes Emerging Markets Equity

6.6%

1.9%

4.5%

10.4%

-19.8%

10.2%

79.5%

-35.7%

2.69

171.1

Vanguard FTSE Emrging Markts Indx ETF

VEE-T

6.4%

-

-

15.5%

-

-

-

-

1.43

113.7

AGF Emerging Markets

5.8%

6.4%

5.0%

14.7%

-14.6%

15.3%

60.3%

-35.2%

3.06

978.7

CIBC Emerging Markets Index

5.3%

3.3%

0.3%

14.2%

-16.8%

10.5%

42.3%

-39.0%

1.36

129.8

BMO Emerging Markets Equity ETF

ZEM-T

5.2%

4.0%

-

13.6%

-17.1%

11.9%

-

-

0.61

66.2

MSCI Emerging Markets Free ($ Cdn)

7.6%

5.2%

2.2%

16.0%

-16.1%

13.0%

52.0%

-41.4%

-

-

MSCI World ($ Cdn)

15.9%

8.6%

1.9%

14.0%

-2.9%

6.8%

11.8%

-26.1%

-

-

* BMO GDN Emerging Market Advisor Series had the same return. Source: Lipper